In health care, Goliaths look to startups for ideas

People walking and sitting in an office building (Courtesy of MATTER)
MATTER, a Chicago incubator for eHealth startups, provides mentoring and office space for 125 aspiring entrepreneurs. (Courtesy photo)

Pharmaceutical companies spend billions of dollars and employ thousands of scientists to search for new drugs. Yet they also invest in startups because, according to an industry expert, “None of us is as smart as all of us.”

Joris Van Dam, who researches pharmaceuticals for the global company Novartis, says the symbiosis between small entrepreneurs and big multinational companies is fueled by a common desire to develop electronic health technology (eHealth), which can improve profits and patient care.

Many eHealth startups are spawned in technology incubators, hotbeds of innovation springing up in New York, Chicago, Boston, Paris and other cities trying to replicate the collaborative, entrepreneurial model that made Silicon Valley the envy of the world.

The U.S. government, too, is working with other countries and partnering with the private sector on eHealth innovations. In the Roadmap project, the United States and the European Union are seeking to standardize international patient summaries so information can flow across borders. Common standards also can help innovative products reach new markets faster.

The evolution of eHealth

The state of Illinois invested $4 million last year into MATTER, an incubator that calls itself “a community of health care innovators who aspire to heroic change.” It houses 125 separate startups, some working on software and others tinkering with medical devices and diagnostic tests. It connects entrepreneurs with mentors, offers lectures and even lets innovators try things out in a mock hospital room. Hospitals, larger businesses and universities invest in its operation.

The Healthcare Innovation and Technology Lab (HITLab) in New York City carries out analytical work to help “large institutions and stakeholders reduce bad bets made on new health care ideas,” said Stan Kachnowski, its chair. “You hear a lot of people talk about the [eHealth] revolution. There’s no such thing. It’s an evolution. Everyone is trying to understand what works where and with whom.” HITLab has carried out studies for governments and foundations in 20 countries.

Novartis was an early investor in TriNetX, a Cambridge, Massachusetts, startup that amasses anonymous patient information from hospitals in the U.S. and Europe. “Our mission is to disrupt the clinical trial design space by unleashing the power of data currently locked away,” said TriNetX’s chief executive, Gadi Lachman.

Rock Health, a venture capital company in San Francisco, reports that digital health companies attracted a record $4.5 billion in funding in 2015. Companies that sell wearable devices to track fitness and other health information are among the hottest. So are tech startups that offer novel ways to make sense of huge amounts of data.

Steven Collens, chief executive of Chicago’s MATTER, believes the collaboration among firms in early stages of development is essential. “It’s very difficult for the lonely inventor in a garage to come up with an eHealth solution. The best solutions are going to come from entrepreneurs working together with health systems and pharmaceutical companies.”